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PI OriginalSteven Ross JohnsonThursday December 15th, 2011, 2:32pm

Corporate Tax Dodge Report Reveals Millions Lost In Illinois

As Illinois lawmakers this week passed a $371 million tax break
package aimed at keeping Chicago’s financial exchanges and Sears from
fleeing the state, a new study has helped to shed some light on the
issue of corporate tax incentives, finding that a number of Illinois’
most profitable firms have paid little in state corporate income taxes
in the past three years.

As Illinois lawmakers this week passed a $371 million tax break
package aimed at keeping Chicago’s financial exchanges and Sears from
fleeing the state, a new study has helped to shed some light on the
issue of corporate tax incentives, finding that a number of Illinois’
most profitable firms have paid little in state corporate income taxes
in the past three years.

A profile of more than 200 Fortune
500 companies conducted by the non-profit tax think tank, Institute on
Taxation and Economic Policy, found two Illinois-based firms – Baxter
International and Integrys Energy Group — paid no state corporate income
taxes between 2008 and 2010 while reporting combined profits totaling
more than $1.7 billion for the same period.

“Pretty clearly, a
lot of the biggest and most profitable corporations doing business in
Illinois and other states are finding ways to reduce their income state
tax liability to zero or even below zero,” said Matthew Gardner, ITEP
executive director and co-author of the study.

“In Illinois and in other
states, there are at the same time many companies that are paying
something close to what they ought to pay at 5, 6 or 7 percent of their
income in state corporate taxes," he added. "So there is a real divergence between
the companies that have been favored with company-specific tax breaks
and those that have been left out in the cold.”

At issue,
according to Gardner, has been the practice of state lawmakers over the
years of targeting just a few specific companies for tax breaks, which
he said has had a profound impact on other taxpayers, including small
businesses and residents.

“It seems you’ve got this parade of
companies going to the governor and the legislature saying, ‘if you
don’t give us a tax break right now we’re going to leave,’” Gardner
said. “It’s a real slippery slope and once you start down that slope,
it’s hard to know when that ends.”

In fact, Baxter
International was noted for having received a total of around $28
million in state income tax breaks, which came out to having an overall tax rate of
-3.1 percent been the yeas of 2008 and 2010.

Also included in the study was Chicago employer
Boeing, who paid a tax rate of 0.1 percent between 2008 and 2010 while
reporting $9.7 billion in profits over that time.

In all, 13
of 16 corporations listed in the report paid less than the state
corporate income tax rate of 4.8 percent during the period studied. In
January, the Illinois legislature raised the corporate income tax rate
to 7 percent, but House Republicans are seeking to lower it once again.

Gardner pointed out the findings of the report
were based on what companies paid nationwide in state income tax and
does not detail what they might have paid to a specific state.

“There’s
no smoking pistol that says Illinois taxpayers have been
short-changed,” Gardner added. “But it’s pretty clear that somebody is
being short-changed, whether it’s the residents of Illinois or Wisconsin
or California from the tax avoidance that’s being documented in this
report.”

The overall impact, Gardner said, has been a loss of
some $42 billion in state revenues between 2008 to 2010. Indeed, the
report seems to highlight an ongoing trend over the past decade of declines in the amount of funds states have collected in corporate
state income tax.

While Gardner acknowledged the political
pressure put on lawmakers to boost their economies, he said corporate
tax cuts were not an effective means of achieving that goal.

“There
still is this inexorable math where if you cut a tax, it’s got to be
paid for,” he said. “That could mean cutting education spending –
that could mean cutting not building that bridge you were talking about
building, it could mean hiking taxes on low- and middle- income families
instead, which none of these are solutions that would make sense to
people as a growth strategy.”

But others contend Illinois’s
current corporate tax rate has become another hurdle companies have to
overcome in order to thrive.

“I think our businesses right
now are struggling with a very high corporate tax rate,” said Connie
Beard, tax director for the Illinois Chamber of Commerce. “So tax
benefits that bring the cost of doing business in Illinois benefits all business.”

Instead of tax breaks that target a few
companies, Beard advocated reducing the overall state corporate income
tax rate for all businesses in order to avoid threats of companies
leaving in the future.

“We do support tax reform in Illinois,
we think there’s a lot that can be done to make the Illinois tax
structure more fair for all companies small and large so that we aren’t
selecting one or two companies to get benefits — like we’ve seemed to
have been doing recently,” Beard said. “We definitely would support
legislation to reform the tax code.”

In terms of economics,
Beard pointed to the large number of “secondary benefits” that went with
attracting or even retaining businesses.

“I think it would
be to the benefit of any locality to have a business locate within your
area,” Beard said. “That means jobs — that means people moving there,
purchasing there, eating there — there’s all sorts of secondary
benefits, plus the property taxes and utility taxes that the local
government would get that they would not have gotten without that
company locating there.”

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Comments

shoedog60626

4:59pm

Thu Dec 15

See? The right of "PERSONHOOD" comes w/ the responsibility of "PERSONHOOD"!! If those greedy bastard large corporations expect the right to bribe elected officials w/ their bottomless pockets.... let the greedy bastards pay taxes at the same rate that I DO!!!
I am SOOOOOO tired of paying my taxes at a Single person's rate while large sycophant producing tax dodgers get by w/ little or NO taxes siphoned out of their obscene profits!!!

shoedog60626

5:40pm

Thu Dec 15

And are we to believe our elected officials can't seem to figure out how to get this state out of it's financial BLACK HOLE? Hellllllooooo!!!! Stop expecting the little guys to pay that bill Mr Governor! Start paying for your own lunches Mr Cullerton!! Pay for your own spa treatment Ms Radogno... (Wait... you obvioiusly havent' had one of those!!)
Try to grow a set and make Illinois the first state that that finally stands up for the average JOE and says to the big boys... Pay up or GO!!!!